Modvat credit on duty-paid flattened metal containers used for packing was admissible despite in-factory reformation.

Modvat credit was admissible on flattened metal containers brought into the factory for reformation into packing materials for food products. The containers had already suffered duty as metal containers, and their reformation in the assessee's factory did not change their duty-paid character or deny their use as inputs in packing the final product. The exemption notification did not preclude credit on that basis, and the departmental circular supported availability of credit. Credit was therefore allowed.

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Issues: Whether Modvat credit was admissible on flattened metal containers brought into the factory for use as packing materials for food products, notwithstanding that the containers were reformed in the assessee's factory and were covered by an exemption notification.

Analysis: The flattened metal containers had already discharged duty liability as metal containers and were brought into the factory for reformation into usable packing containers. The exemption notification did not change the character of the duty-paid material or convert it into a different product merely because it was reformed in the factory. The Tribunal relied on its earlier view that flattened containers could serve as inputs in the manufacture and packing of the final product, and that credit could not be denied merely because the reformation took place within the assessee's factory. The departmental circular also supported the availability of credit in such circumstances.

Conclusion: Modvat credit on the flattened metal containers was admissible and could not be denied on the ground that the containers were reformed in the assessee's factory or were exempted from duty.

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